Computation of Excise Duty where the goods are sold at a price below the cost of production

Excise duty to be computed on the basis of manufacturing cost plus profit where the goods are sold at a price below the cost of production : It was held that  commercial cost of manufacturing the cars was not reflected in the assessable value declared by the assessee.Hence it cannot be accepted as ‘normal price’ for the sale of cars. If any unusual price is charged because of ‘extra commercial consideration’, the price charged could not be taken to be fair and reasonable for the purpose of levy of excise duty. It was held that the price at which goods were sold clearly indicated that these goods cannot be termed as “ordinarily sold” in terms of the Central excise provisions as the cars were being sold at a loss for five years. The Court also observed that since the assessable value is not ascertainable, the best judgment method should be resorted to and the excise duty should be computed on the basis of manufacturing cost plus profit.

Supreme Court of India

CIVIL APPELLATE JURISDICTION

Commissioner of Central Excise, Mumbai

Vs.

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